Fintech Ecosystem in Venezuela

Venezuela’s economy has been going through difficult times for more than a decade and it has had a significant impact on the lives of Venezuelans. In fact, between 2013 and 2019 alone, Venezuela lost almost two-thirds of its Gross Domestic Product (GDP) and, in 2020; the Venezuelan economy fell by 30%, almost double what was forecast before the pandemic of coronavirus. It is even projected that in 2021 the decline in GDP will be 7%.

With a population of 28 million and a GDP per capita of € 2,886 in 2018, Venezuela is one of the countries with the worst quality of life in the world according to the human development index. Likewise, 79% of Venezuelans are in extreme poverty, which means that the income received is insufficient to cover the food basket (El País, 2020)

Fintech in Venezuela 

In Venezuela, the Fintech ecosystem has been improving and increasing in the last 3 years, currently having more than 40 fintechs in the country, classified in the categories of means of payments, technology providers, education in new financial technologies, Insurtech and Crowdfunding. This growth has also represented a 50% increase in the number of fintechs by 2020.

It is also highlighted that 40% of the population in Venezuela is not banked. Despite this, 44% of Venezuelans make payments through digital channels. Likewise, 49% of these make payments from the cell phone thanks to the interbank mobile payment system. In the same way, 98% of the operations are carried out electronically (Sociedad Fintech de Venezuela, 2021). Also Venezuela stands out in Latin America and in the world since they occupy the third place in the world among the countries that use Cryptocurrencies (Crypto adoption index,2020)

It is observed that the Venezuelan economy faces different challenges in the face of the digitization of money. However, the disappearance of the cash bolivar, informal dollarization and the scarce infrastructure in telecommunications, has made it possible for innovative technological solutions that range from payment methods, Insurtech, Crowdfunding and factoring, to gain acceptance. (Fintech Society Venezuela, 2021). Similarly, the Venezuelan market is very receptive to using a method other than those offered by banks, as long as the commissions are lower and have 24/7 availability (Finance, 2019)

In Venezuela, SMEs contribute more than 13% of the PTB, and employ 55% of the entire workforce. In fact, there are around 1million micro-enterprises and about 68,000 small and medium-sized enterprises, of which 56,000 are active in commerce and services and 12,000 in manufacturing. However, due to the country’s crisis there is still a financing gap (Pymes Venezuela). Thus, this represents an opportunity for lending Fintech companies to reduce this gap

The Fintech ecosystem in Venezuela has been growing over the years despite the obstacles it encounters and which have also affected the country’s economy considerably. However, these gaps are also an opportunity for Fintech companies to satisfy this underserved population and find an audience that helps Fintech grow.